Erez Law recently filed a FINRA arbitration against RBC Capital Markets, LLC on behalf of four customers. The two couples, who were residents of Jensen Beach and Pompano Beach, Florida, were customers of Samuel Kolton (CRD# 1739664). Koltun has been in the financial services industry for 29 years and has been registered with RBC Capital in West Palm Beach, Florida since 2009.
The claim alleges that the two retired couples were longtime customers of Kolton and RBC Capital Markets, LLC. The elderly couples were interested in generating a modest degree of income while preserving their retirement savings in their fixed income accounts. They were interested in investing in high quality bonds that would generate interest and repay principal at maturity. Kolton presented the Puerto Rico bonds he recommended as high quality tax-free fixed income investments that would generate income while preserving principal. Erez Law alleges that Kolton did not disclose that the clients could lose most of the money invested.
Despite each couple’s retirement status and desire to maintain their retirement savings, Koltun recommended high risk and unsuitable Puerto Rico bonds with unacceptable results. The Puerto Rico bonds that Koltun recommended were negatively impacted by Puerto Rico’s declining economic and fiscal condition.
Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history.
Kolton failed to adequately explain the significant risks associated with the Puerto Rico bonds he recommended, and he instead led the clients to believe the bonds were secure, insured and low risk investments. Kolton recommended the clients continue to hold their Puerto Rico bonds as they declined in value and caused them significant losses. It is alleged that the Puerto Rico bonds that Kolton recommended had all of most have defaulted and are worth a fraction of what the clients paid for them. Kolton recommended the couples invest in Puerto Rico General Obligation bonds, Puerto Rico Building Authority bonds, COFINA bonds, among many others.
According to his CRD, Koltun has been the subject of six customer disputes, one of which was closed without action, dating from 2000 to 2016:
- September 2016. “Clients alleged broker recommended over-concentration in unsuitable Puerto Rico bonds, in period 2012 to 2015.” The customer sought $80,000 in damages and the case was settled for $30,000.
- April 2016. “Client alleges recommendations of unsuitable and over-concentrated Puerto Rico bonds in her account, in period 2011 to 2015.” The customer sought $260,000 in damages and the case was settled for $65,000.
October 2015. “Claimants allege that their account was over-concentrated in Puerto Rico bonds and that the risks associated with this investment were not disclosed, in the period 2008 through 2015.” The customer sought $750,000 in damages and the case was settled for $212,500.
- October 2015. “Claimants allege that their accounts were over-concentrated in Puerto Rico bonds and that the risks associated with this investment were not disclosed, in the period 2010 through 2015.” The customer sought $655,000 in damages and the case was settled for $399,000.
- June 2000. “Claimant alleged common law fraud, negligent misrepresentation, breach of fiduciary duty, & violation of Chapter 517, Florida statutes relating to purchases made in July 1999.” The customer sought $15,000 in damages and the case was settled for $95,000.
Additionally in August 2004, Kolton was the subject of a suspension from NASD. According to the Letter of Acceptance, Waiver, and Consent that Koltun signed, he was fined $12,500, including disgorgement of $7,864.14 in commissions, and suspended from association with any NASD member for 10 business days. The AWC alleged that Koltun recommended numerous Class B mutual fund transactions to customers that were unsuitable for the customers, in situations where Class A shares should have been recommended instead. In these instances, if Class A shares had been recommended, the customers would have been eligible to receive breakpoints on their purchases, paid lower fees, and avoided deferred sales charges.
Erez Law represents investors in the United States and Puerto Rico for claims against RBC Capital Markets, LLC broker Samuel Kluft Koltun, who is alleged to overconcentrate customer investment portfolios in high risk and unsuitable Puerto Rico bonds.
A broker must have reasonable grounds for each recommendation made to investors considering such factors as the customer’s other securities holdings, financial situation, and risk tolerance. In addition, before a firm offers a security to its customers, the firm must conduct due diligence, investigating the facts surrounding the security, to confirm that it is suitable for any customer of the firm. The suitability of an investment for a particular individual is at the center of the investment process and one of the key fiduciary duties owed by a firm and its broker to the customer. A firm may be held liable for its failure to recommend suitable investments to its customers.
In addition, pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, RBC Capital Markets, LLC may be liable for investment or other losses suffered by Koltun’s customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.